10-Q 1 0001.txt FORM 10Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) (X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended: May 31, 2000 ( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _____________________ _______________ to Commission File Number 0-2733 AZTEC MANUFACTURING CO. (Exact name of registrant as specified in its charter) TEXAS 75-0948250 -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation of organization) Identification No.) 400 North Tarrant, Crowley, Texas 76036 -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (817) 297-4361 ----------------------------- NONE -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ______ ----- Indicate the number of outstanding of each of the issuer's classes of common stock, as of the close of the period covered by this report. Outstanding at May 31, 2000 Common Stock, $1.00 Par Value 4,834,058 ----------------------------- --------------------------- Class Number of Shares AZTEC MANUFACTURING CO. INDEX ----- PART I. Financial Information Page No. --------------------- -------- Item 1. Financial Statements Consolidated Condensed Balance Sheets at May 31, 2000 and February 29, 2000 3 Consolidated Condensed Statements of Income for the Periods Ended May 31, 2000 and May 31, 1999 4 Consolidated Condensed Statements of Cash Flow for the Periods Ended May 31, 2000 and May 31, 1999 5 Notes to Consolidated Condensed Financial Statements 6-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-9 PART II. Other Information ----------------- Item 6. Exhibits and Reports on Form 8-K 10 SIGNATURES 10 2 PART I. FINANCIAL INFORMATION ITEM I. FINANCIAL STATEMENTS Aztec Manufacturing Co. Consolidated Condensed Balance Sheet 05/31/00 02/29/00 ASSETS UNAUDITED AUDITED ------ ------------- -------------- CURRENT ASSETS CASH AND CASH EQUIVALENTS $ 1,533,318 $ 1,328,139 ACCOUNTS RECEIVABLE(NET OF ALLOWANCE) 16,895,536 19,571,111 INVENTORIES RAW MATERIAL 9,843,637 8,923,550 WORK-IN-PROCESS 2,772,750 2,197,548 FINISHED GOODS 1,285,649 1,432,220 REVENUE IN EXCESS OF BILLINGS ON UNCOMPLETED CONTRACTS 755,088 487,235 DEFERRED INCOME TAXES 635,673 635,673 PREPAID EXPENSES AND OTHER 275,759 382,047 ------------ ------------- TOTAL CURRENT ASSETS 33,997,410 34,957,523 LONG TERM INVESTMENTS - 200,000 PROPERTY,PLANT AND EQUIPMENT, NET 28,186,394 28,269,959 INTANGIBLE ASSETS, NET 20,467,986 20,792,683 OTHER ASSETS 520,538 583,576 ------------ ------------- TOTAL ASSETS $ 83,172,328 $ 84,803,741 ============ ============= LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES: LONG TERM DEBT DUE WITHIN ONE YEAR $ 4,345,284 $ 4,367,731 ACCOUNTS PAYABLE 7,728,606 7,302,699 BILLINGS IN EXCESS OF REVENUE ON UNCOMPLETED CONTRACTS 116,729 405,435 ACCRUED LIABILITIES 6,832,353 7,753,382 ------------ ------------- TOTAL CURRENT LIABILITIES 19,022,972 19,829,247 LONG TERM DEBT DUE AFTER ONE YEAR 27,966,050 31,075,272 DEFERRED INCOME TAXES 878,500 878,500 SHAREHOLDERS' EQUITY: COMMON STOCK,$1 PAR VALUE SHARES AUTHORIZED-25,000,000 SHARES ISSUED 6,304,580 6,304,580 6,304,580 CAPITAL IN EXCESS OF PAR VALUE 11,224,981 11,113,565 RETAINED EARNINGS 31,430,370 29,559,646 LESS COMMON STOCK HELD IN TREASURY (13,655,125) (13,957,069) ------------ ------------- (1,470,522 AND 1,503,024 SHARES AT COST RESPECTIVELY) TOTAL SHAREHOLDERS' EQUITY 35,304,806 33,020,722 ------------ ------------- TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 83,172,328 $ 84,803,741 ============ ============= 3 PART I. FINANCIAL INFORMATION ITEM I. FINANCIAL STATEMENTS Aztec Manufacturing Co. Consolidated Condensed Statements of Income
THREE MONTHS ENDED 05/31/00 05/31/99 UNAUDITED UNAUDITED ------------ ------------ NET SALES $ 27,944,451 $ 20,670,621 COSTS AND EXPENSES COST OF SALES 20,744,693 15,316,585 SELLING/G & A EXPENSES 3,513,518 2,710,212 INTEREST EXPENSE 628,125 353,095 OTHER EXPENSE 64,476 33,377 ------------ ------------ 24,950,812 18,413,269 ------------ ------------ INCOME BEFORE INCOME TAXES 2,993,639 2,257,352 PROVISION FOR INCOME TAXES 1,122,913 846,537 ------------ ------------ NET INCOME $ 1,870,726 $ 1,410,815 ============ ============ INCOME PER SHARE BASIC $ 0.39 $ 0.30 DILUTED $ 0.38 $ 0.30
4 PART I. FINANCIAL INFORMATION ITEM I. FINANCIAL STATEMENTS Aztec Manufacturing Co. Consolidated Condensed Statements of Cash Flows
THREE MONTHS ENDED 05/31/00 05/31/99 ------------- ------------- CASH FLOWS PROVIDED BY OPERATIONS: NET INCOME $ 1,870,726 $ 1,410,815 ADJUSTMENTS TO RECONCILE NET INCOME TO PROVISION FOR BAD DEBTS 45,199 70,443 AMORTIZATION AND DEPRECIATION 1,413,116 1,015,001 GAIN ON SALE OF PROPERTY (4,561) - OTHER 161,250 - INCREASE (DECREASE) FROM CHANGES IN ASSETS & LIABILITIES ACCOUNTS RECEIVABLE 2,630,376 (610,344) INVENTORIES (1,348,718) 392,586 PREPAID EXPENSES 106,288 44,098 OTHER ASSETS 23,237 (2,405) REVENUE IN EXCESS OF BILLINGS (556,559) - ACCOUNTS PAYABLE 425,907 1,646,991 ACCRUED LIABILITIES (150,709) 1,319,615 ------------- ------------- NET CASH PROVIDED BY OPERATIONS 4,615,552 5,286,800 NET CASH USED FOR INVESTING ACTIVITIES: PROCEEDS FROM SALE OF EQUIPMENT 26,438 - PURCHASE OF PROPERTY PLANT AND EQUIPMENT (986,933) (597,038) PROCEEDS FROM SALE OF INVESTMENTS 200,000 - ------------- ------------- NET CASH USED FOR INVESTING ACTIVITIES (760,495) (597,038) CASH FLOWS FROM FINANCING ACTIVITIES PROCEEDS FROM EXERCISE OF STOCK OPTIONS 252,109 29,500 PAYMENTS ON LONG TERM DEBT (3,131,669) (4,273,810) CASH DIVIDENDS PAID (770,318) (566,872) ------------- ------------- NET CASH USED FOR FINANCING ACTIVITIES (3,649,878) (4,811,182) ------------- ------------- INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS 205,179 (121,420) CASH & CASH EQUIVALENTS, BEGINNING OF PERIOD 1,328,139 800,183 ------------- ------------- CASH & CASH EQUIVALENTS, END OF PERIOD $ 1,533,318 $ 678,763 ============= =============
5 AZTEC MANUFACTURING CO. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS ---------------------------------------------------- Summary of Significant Accounting Policies ------------------------------------------ 1. A summary of the Company's significant accounting policies is presented on Page 20 and 21 of its 2000 Annual Shareholders' Report. 2. In the opinion of Management of the Company, the accompanying unaudited consolidated condensed financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position of the Company as of May 31, 2000, and the results of its operations and cash flows for the periods ended May 31, 2000 and 1999. 3. Earnings per share is based on the month-end average number of shares outstanding during each year, adjusted for the dilutive effect of stock options. The following table sets forth the computation of basic and diluted earnings per share:
Three months ended May 31, 2000 1999 ------------ ------------ (Dollars in thousands except earnings per share) Numerator: Net income for basic and diluted earnings per common share $ 1,871 $ 1,411 Denominator: Denominator for basic earnings per common share -weighted average shares 4,817,858 4,738,766 Effect of dilutive securities: Employee and Director stock options 111,231 8,269 ------------ ------------ Denominator for diluted earnings per common share -adjusted weighted- average shares and assumed conversions 4,929,089 4,747,035 ============ ============ Basic earnings per common share $ .39 $ .30 ============ ============ Diluted earnings per common share $ .38 $ .30 ============ ============
6 4. A summary of the Company's operating segments is defined on page 28 and 29 of its 2000 Annual Shareholders' Report. Information regarding operations and assets by segment in thousands is as follows:
Three Months Ended May 31, 2000 1999 -------- -------- Net Sales: Manufactured Products $ 14,853 $ 10,947 Services 13,091 9,724 -------- -------- $ 27,944 $ 20,671 Operating Income (a): Manufactured Products $ 2,024 $ 1,071 Services 2,797 2,476 -------- -------- $ 4,821 $ 3,547 General Corporate Expense $ 1,212 $ 925 Interest Expense 628 353 Other (Income) Exp., Net (b) (13) 12 -------- -------- $ 1,827 $ 1,290 Income Before Income Taxes $ 2,994 $ 2,257 ======== ======== Total Assets: Manufactured Products $ 42,053 $ 28,062 Services 38,708 27,893 Corporate 2,411 2,010 -------- -------- $ 83,172 $ 57,965 ======== ========
(a) Operating income consists of net sales less cost of sales, specifically identifiable general and administrative expenses and selling expenses. (b) Other (income) expense, net includes gains and losses on sale of property, plant and equipment and other (income) expense not specifically identifiable to a segment. 7 Item 2. Management's Discussion and Analysis of Financial Condition and -------------------------------------------------------------------------- Results of Operations --------------------- RESULTS OF OPERATIONS ---------------------- Consolidated net sales increased 35% for the three-month period ended May 31, 2000 as compared to the same period in 1999. Net sales in the Manufactured Products Segment were up $3.9 million or 36% for the three-month period ended May 31, 2000, as compared to the same period in fiscal 2000. Quarterly results in the Manufactured Products Segment for the period ended May 31, 2000 include three months of revenues from CGIT Westboro, Inc. which was acquired on September 1, 1999. Backlog for the Manufactured Products Segment at the end of May 31, 2000, was $32 million compared to $18.2 million at the end of May 31. 1999. Net sales in the Services Segment, which is made up of the Company's galvanizing operations, were up $3.4 million or 35% for the three-month period ended May 31, 2000 as compared to the same period in the prior year. Quarterly results for the period ended May 31, 2000 include three months of revenues from Westside Galvanizing Services, Inc. acquired on January 31, 2000. Consolidated operating income (net sales less operating expenses) was up 36% for the three month period ended May 31, 2000 as compared to the same period in 1999. Operating income in the Manufactured Products Segment was up $953,000 or 89% for the three month period ended May 31, 2000 as compared to the same period in 1999. Increases in operating income were experienced in the majority of this segments product lines for the quarter ending May 31, 2000 as compared to the same quarter in the prior year. Improvements in operating efficiencies and increased volumes contributed to this increase. In the Services Segment, operating income was up $321,000 or 13% for the quarter ended May 31, 2000 as compared to the same period in 1999. Increased operating income in the Services Segment was due to increased volumes and improved operating efficiencies coupled with the addition of Westside Galvanizing Services for the compared periods. General corporate expenses (selling, general and administrative expense, and other (income) expense) for the quarter ended May 31, 2000 were up $843,000 or 30% as compared to the same period in the same period in the prior year. As a percent of sales, general corporate expenses were 12.8% for the quarter ended May 31, 2000 compared to 13.2% for the quarter ended May 31, 1999. Net interest expense for the quarter ended May 31, 2000 was $628,000, up 78% from the same quarter in fiscal 2000. This increase was due to larger outstanding loan balances during the first quarter of fiscal 2001 associated with the acquisitions made during fiscal 2000. 8 LIQUIDITY AND CAPITAL RESOURCES ------------------------------- Net cash provided by operations was $4.6 million for the three-month period ended May 31, 2000 compared to $5.3 million for the same period in fiscal 2000. Net cash provided by operations was generated by $1.9 million in net income, $1.4 million in depreciation and amortization, and $1.3 million in other changes in assets and liabilities. During the three month period ended May 31, 2000, capital improvements were made in the amount of $987,000, long-term debt was repaid in the amount of $3.1 million, and cash dividends of $770,000 were paid. The Company has a credit facility with a bank that provides for a $20 million revolving line of credit, a $10 million term note, and a $17.5 million term note. At the end of May 31, 2000, the Company had $7.5 million outstanding under the revolving line of credit and $25.2 million outstanding under the two term facilities. At May 31, 2000, the Company had approximately $10.2 million available under the revolving line of credit. Management believes that it's current credit facility coupled with the Company's borrowing capacity along with cash generated from operations will be sufficient to accommodate the Company's current operations, internal growth and possible acquisitions. Forward Looking Statements -------------------------- This Report contains, and from time to time the Company or certain of its representatives may make, "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are generally identified by the use of words such as "anticipate," "expect," "estimate," "intend," "should," "may," "believe," and terms with similar meanings. Although the Company believes that the current views and expectations reflected in these forward-looking statements are reasonable, those views and expectations, and the related statements, are inherently subject to risks, uncertainties, and other factors, many of which are not under the Company's control. Those risks, uncertainties, and other factors could cause the actual results to differ materially from these in the forward-looking statements. Those risks, uncertainties, and factors include, but are not limited to, many of the matters described in this Report: change in demand, prices and raw material cost, including zinc which is used in the hot dip galvanizing process; changes in the economic conditions of the various markets the Company serves, foreign and domestic, including the market price for oil and natural gas; acquisition opportunities, adequacy of financing, and availability of experienced management employees to implement the Company's growth strategy; and customer demand and response to products and services offered by the Company. The Company expressly disclaims any obligations to release publicly any updates or revisions to these forward-looking statements to reflect any change in its views or expectations. 9 PART II. OTHER INFORMATION AZTEC MANUFACTURING CO. Item 6. Exhibits and Reports on Form 8-K ----------------------------------------- (A) Exhibits - There were no exhibits filed with this 10-Q for the three months ended May 31, 2000. (B) Reports on Form 8-K - There were no 8-K's filed during the three months ended May 31, 2000. All other schedules and compliance information called for by the instructions for Form 10-Q have been omitted since the required information is not present or not present in amounts sufficient to require submission. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AZTEC MANUFACTURING CO. -------------------------------- (Registrant) Date: 7/13/00 /s/ Dana Perry ------- -------------------------------------- Dana Perry, Vice President for Finance Chief Financial Officer 10